To better engage the next generation of investors, the image of the investment advisor needs a refresh. Advisors need to build the relationships that young investors expect and begin to customize their approach to fit these young clients’ unique needs.
Challenging Conventional Wisdom
According to a new study from CFA Institute and the FINRA Investor Education Foundation, Uncertain Futures: 7 Myths about Millennials and Investing, young investors are not the tech-obsessed, overconfident, financially impatient people many assume them to be. In reality, most millennials realize that they lack the skills, knowledge, experience and confidence to make good investment decisions and are looking for investment advisors to help them overcome these obstacles to become capable investors.
The good news for advisors is that despite growing up during the global financial crisis, most millennials hold financial professionals in high regard and acknowledge the expertise they can provide. Of the millennials already using a financial professional, 72 percent are very or extremely satisfied with them, and of those not working with a professional, only 15 percent cite lack of trust as the reason for it.
What may be an obstacle to attracting or building long-lasting relationships with millennial clients is the inability of some advisors to change their traditional approaches to fit the unique needs of this generation. In fact, millennials reported the following as the most important actions for advisors hoping to build trust with them: “taking time to educate me,” “putting my interests first” and “customizing their approach to fit my needs.”
Customizing an approach can mean a variety of things outside of investment strategy and process. A majority of those surveyed would like to see financial professionals provide a more holistic set of services that includes such things as help on budgeting and managing debt. Gaining skills in those areas would allow young clients to accumulate the additional capital needed for investment.
Advisor As Teacher
Outside of income and debt issues, a lack of knowledge was cited as a significant obstacle keeping millennials from investing. This lack of knowledge and experience may also explain why over 50 percent of millennial investors are not very confident about their investment decision-making ability and why those surveyed said that when hiring a financial professional, they are looking for a teacher more than a friend.
Contrary to conventional wisdom, most millennials are not do-it-yourself investors. Instead, they are looking for investment advisors who will partner with them to achieve their financial goals by transferring their skills, experience and knowledge and thus helping millennials build the confidence to be effective investment decision makers.
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